Reconciling Regional Differences in Financial Development and Carbon Emissions: A Dynamic Panel Data Approach

This paper investigates the relationship between financial development and carbon emissions using the regional panel data in China from 1997 to 2011. We find that financial development reduces carbon emissions in the developed regions, while increases emissions in the less developed regions, thereby reconciling the current conflicting evidence on this issue. We argue that both market force and institutional constraints prevent financial development from improving the environment in the less developed regions. Hence, the local governments should play a more significant role in the environmental upgrading, for example, actively promoting the local green financing. (C) 2017 The Authors. Published by Elsevier Ltd.